ADI's State Of Digital Advertising: Asia-Pacific

1. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Methodology Most comprehensive and accurate report of its kind in the industry  Report based on analysis of 250 billion visits to over 3,000 websites (Jan. 2014 to March 2017)  3.0 billion video ad impressions from India, Japan, Australia and South Korea  100 billion responses to paid searches  ADI Summit Survey 2017:  Email survey with 1,000 consumers over the age of 18 in each of the following countries:  Australia, India and South Korea; conducted Feb 1-17  Digital Marketing email survey in Australia, India and South Korea (Feb 1-17, 100 per country) of those with influence over the purchase of digital advertising. Data from different Adobe solutions: Based on analysis of aggregated and anonymous data Adobe Analytics Adobe Media Optimizer Adobe Analytics Cloud Adobe Advertising Cloud Adobe Marketing Cloud

2. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Key Insights 1 Digital advertising costs continue to rise, and search costs have increased 2x faster than inflation in the past two years. 2 Competition for consumer attention and new site visitors will increase as topline growth starts to slow and time on site decreases. 3 The digital disconnect persists. Marketers rate themselves better than consumers do for delivering relevant and interesting ads. Consumers desire personalization, but delivery and privacy issues exist. 4 Advertisers are still not organized to deliver on consumer’s advertising expectations and lag behind US counterparts in terms of automatic/programmatic spend. 5 Without growing markets, pressure mounts on brands to protect their loyal consumer base and to steal from the competition.

3. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. EMBRACING THE OPTIONS Slowing Growth Means Competition Will Heat Up on the Smartphone Battlefield As the internet saturates abroad, competition for traffic will become necessary  Total visits to APAC websites increased 36% over the past 36 months, but the trend is slowing down – quickly Smartphone is the primary device for connecting to brands  Smartphone visits increased +145% since 2014, while visits from desktops and tablets eroded (-9% and -5%, respectively)  This trend pushed total mobile share of traffic to 54% in Q1 2017 4

4. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. EXPENSE OF ADVERTISING Search Costs Outpace Inflation by 2x Cost per click continues to exceed inflation  Inflation in APAC: 6.3% since 2013  Search CPCs rose sharply in 2014 and then retreated to current rates: desktop 11%, mobile 16% (relative to Q4 2013) Advertising costs began to outpace inflation with the advent of the digital era  The cost of reaching consumers on traditional TV began outpacing inflation in the late 1990’s when technology started changing our lives 5

5. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. A SHIFT FROM THE TRADITIONAL Search Remains a Tried-and-True Channel for Acquiring Site Traffic 6 Search traffic continues to grow faster than spend in Asia-Pacific, unlike the trends in the US  Advertisers have increased spend on search by +6% over the past two years  Site visits driven by search have increased by +30% indicating more bang for the buck  The US may be a harbinger of things to come - it costs more money to get less traffic in the US’s saturated market As traffic moves to smartphones, consumers spend less time on web sites  Indian consumers changed their patterns the most, spending 47 (-12%) fewer seconds on site  Hong Kong and Japan saw decreases in time spent similar to those in the US  HK: -19 seconds (– 5% YoY)  Japan: -17 seconds (-4% YoY)  US: -18% seconds (-6% YoY)

6. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. DIGITAL VIDEO AD OPPORTUNITY Marketers Continue to Deploy Mobile Video Ads As Costs Increase 7 Mobile video ad campaigns cost 36% more than last year; desktop CPMs are down 13%  Q4 2016 showed equal growth in the delivery of mobile and desktop-formatted ads (+7% YoY) There’s the risk of losing attention as mobile video ad completion is 24% lower than on a desktop (55% vs. 68%, respectively)  Asia-Pacific consumers are pickier than their US counterparts, completing 4% fewer videos on mobile, and 9% fewer on desktop  Some factors are involved that advertisers need to consider:  Skippable and auto-play preferences  Better targeting and fewer impressions delivered relative to the audience

7. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. FIRST IMPRESSIONS Advertisements Must Pique Interest During Critical First Few Seconds 8 Opening seconds are critical for capturing attention • 22% of viewers move on after a mobile video ad has played for five seconds • The US figure (19%) is slightly lower Consumers might be missing the point of the advertisement • Just over half (55%) of 30 second mobile ads are viewed to the end • The “call to action” is completely missed if placed at the end of an ad – this raises the effective cost of mobile video ads

8. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. CONSUMERS CONTROL THE DRIVER’S SEAT New Customer Traffic Coming From Emerging Channels More and More 9 Generations recognize interesting and relevant ads in different environments  Younger generations equate social media to the source of new information (41%)  Older generations are most likely to notice relevant ads when browsing for information (47%) Social continues to grow, up 33% in Travel and 31% in Retail  Traffic generated from social networks is only the tip of the iceberg given its strength in branding

9. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. THE DIGITAL DISCONNECT Advertisers Often Think They Are Doing Better But Consumers Don’t Agree 10 Consumers’ opinion: there’s room for improvement  Less than half of the consumers think advertisers are doing better than 2 years ago at delivering relevant ads In Australia and India, advertisers disagree with consumers on advertising performance  Marketers believe they are doing a better job than consumers do  Australia: 51% to 38%  India: 63% to 48%  South Korea: 48% to 50% Similar gap in the US  Over half (58%) of advertisers believe they’re doing better at serving valuable ads; only 38% of consumers agree

10. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. THE DIGITAL DISCONNECT Personalization Gap: Desire – Delivery = Opportunity 11  Over half of consumers prefer personalization  Nearly 2 out of 3 (65%) of the 18-34 prefer ads based on their interests/preferences  Even the oldest segment favors personalization over not doing it  The gap between “not good enough” and “want it” suggests room for improvement  The gap is large enough among both age groups to warrant experimentation, particularly among 18-34 Desire is there. Delivery is mixed.  A third of the younger group doesn’t believe personalization is done well enough  Older consumers are more likely to be against any personalization, though 1 in 5 (22%) think advertisers can improve Opportunity exists.

11. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Less than half of consumers are comfortable with exchanging personal data for customized experiences  1.2x higher among younger consumers (47%) than older consumers (38%) Belief that marketers respect privacy is even lower – just 1 in 3 (33%) agree with the statement  1.1x higher among younger consumers (35%) than older consumers (31%) 12 DATA SHARING Privacy Issues Present a Road Block to Personalization

12. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 13 I see your product…so what?  Consumers are most likely attracted by ads that focus on product benefits  Consumers say that personalized, funnier ads would also improve their experience PERSONALIZATION Consumers Seek Practical, Personal Ads Leverage where consumers expect good advertising  57% say Facebook is the social media site doing the best job of showing them interesting and relevant ads

13. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. HISTORICALLY SILOED Fragmented Organizations and Technology Limit Advertising Progress 14 41%work with 3 or more creative agencies (US 42%) 36%work with 3 or more media planning platforms (US 40%) 35%work with 3 or more media buying platforms (US 41%) 36%work with 3 or more data management platforms (US 37%) 32%work with 3 or more analytics platforms (US 44%) 36%work with 3 or more attribution platforms (US 38%) (Source: ADI International Summit Survey 2017)

14. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 15 Advertising still a manual process in APAC  Fewer than 1 in 5 APAC advertisers (19%) spends more then 51% of their budget programmatically. In the US it is 1 in 3.  There’s an opportunity to learn from early adopters and effectively grow their programmatic ad presence across channels Put money where there is growth  Smartphone investments need to improve; 75% of APAC marketers think they underinvested in smartphone advertising AUTOMATED MARKETING APAC Lags Behind US In Programmatic Ad Spend

15. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 16 Return on ad spend (ROAS) tops list of marketer concerns  ROAS is the most cited concern when it comes to media buying in APAC, with over 50% saying it’s an area in which they face the biggest challenge Brand marketers are more concerned than their supply-side counterparts  Regarding ROAS, brand marketers across all surveyed APAC countries are the most concerned GETTING YOUR MONEY’S WORTH Marketers Need To Know The Value of Their Investments

16. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. THE LONG TERM DECISION Make Sure to Protect the Base and Get to Conversion 17 Customers tend to stick with their favorite sites, and they return often  8 out of 10 customers are likely return  In the US, only 7 out of 10 are likely to return Visitor drop off is harder to tackle  Only 1 out of 4 visitors (non-customers) will come back if they didn’t buy/order an item  US non-customers are more likely to return, with 3 out of 10 choosing to do so  Marketers should ensure targeting attracts the right customer and that the experience creates the desire to return

18. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Glossary 19 1. Click Through Rate (CTR): Clicks divided by impressions 2. CPM: Cost per thousand impressions 3. CPC: Cost per click 4. Completion Rate: Ads completed (100%) divided by impressions 5. Growth: Percent change from base period 6. Customer: Visitor who has made one or more purchases in Retail or bookings in Travel 7. Non-Customer: Visitor who has not made a purchase or booking 8. Frequency: How often someone visits a website 9. Web Traffic or Visits: Visits occurring to a website via any mobile device; exclusive of app traffic

19. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 20 (Source: ADI International Summit Survey 2017) Marketer: For the following ad channels, what portion of your total advertising budget is allocated towards automated (programmatic) channels? (Percent answering 51% or more) Traditional TV Connected TV Desktop Video Mobile Video Out-of- home Search Display Social US 35% 35% 37% 40% 31% 39% 38% 41% Australia 9% 10% 11% 17% 12% 14% 12% 20% India 25% 29% 26% 31% 23% 31% 38% 38% South Korea 3% 6% 11% 14% 8% 20% 19% 25% APPENDIX Data Tables

20. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. Marketer: Compared to two years ago, how would you rate your ability to effectively reach consumers with ads they find valuable or compelling? (Data table shows percent that rate themselves as “better than 2 years ago”) 21 Brand Advertising agency / Technology provider / Publisher Australia 55% 31% India 74% 55% South Korea 59% 39% US 59% 56% APPENDIX Data Tables (Source: ADI International Summit Survey 2017)

21. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. APPENDIX Data Tables 22 Australia India South Korea US Brand Advertising agency / Technology provider / Publisher Brand Advertising agency / Technology provider / Publisher Brand Advertising agency / Technology provider / Publisher Brand Advertising agency / Technology provider / Publisher Media quality (brand safety, ad fraud, viewability) 36% 35% 61% 46% 57% 35% 50% 49% Integrated data and media buying solution 45% 29% 50% 45% 45% 33% 40% 51% Accurately measuring return on ad spend (ROAS) 66% 52% 54% 45% 57% 40% 46% 39% Economic transparency 41% 32% 30% 57% 52% 47% 44% 51% Data leakage 39% 39% 61% 27% 34% 40% 31% 34% Data ownership 18% 16% 26% 32% 16% 26% 31% 30% Media independence 9% 19% 9% 9% 5% 7% 7% 5% Marketer: Three biggest challenges in media buying (Source: ADI International Summit Survey 2017)

22. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 23 Marketer: In terms of 2016 media spend - where marketers think they underinvested in 2016 Australia India South Korea US Brand Advertising agency / Technology provider / Publisher Brand Advertising agency / Technology provider / Publisher Brand Advertising agency / Technology provider / Publisher Brand Advertising agency / Technology provider / Publisher Desktop advertising 19% 28% 61% 70% 45% 45% 64% 61% Smartphone advertising 78% 62% 92% 88% 62% 67% 83% 80% Tablet advertising 67% 48% 67% 68% 36% 33% 58% 71% Linear TV 53% 45% 44% 68% 36% 27% 56% 52% Other 0% 0% 0% 0% 2% 0% 3% 0% APPENDIX Data Tables (Source: ADI International Summit Survey 2017)

23. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 24 Australia India South Korea US 18-34 35+ 18-34 35+ 18-34 35+ 18-34 35+ Ads focused on product benefits 17% 18% 36% 49% 40% 43% 22% 26% Ads focused on price 17% 14% 18% 9% 16% 13% 17% 9% Ads that speak to my values 18% 13% 25% 21% 12% 20% 15% 13% Ads that make me laugh 38% 40% 20% 18% 24% 18% 37% 35% None of the above 11% 14% 0% 2% 7% 5% 9% 17% Consumer: What types of ads are most likely to attract your attention? Consumer: When do you tend to see the most interesting, relevant online ads today? Australia India South Korea US 18-34 35+ 18-34 35+ 18-34 35+ 18-34 35+ While using social media (website or mobile app) 43% 22% 45% 34% 36% 22% 50% 20% While web browsing for information 28% 50% 31% 39% 35% 50% 30% 55% APPENDIX Data Tables (Source: ADI International Summit Survey 2017)

24. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 25 Australia India South Korea US 18-34 35+ 18-34 35+ 18-34 35+ 18-34 35+ If they were shown to me less frequently 27% 29% 22% 22% 14% 12% 29% 40% If they were better personalized to me 21% 10% 36% 29% 32% 28% 22% 11% If they spoke more to my values 16% 17% 24% 29% 16% 21% 16% 12% If they were funnier 28% 26% 17% 16% 33% 32% 24% 20% None of the above 9% 18% 0% 4% 5% 7% 9% 17% Consumer: Which of the following would most improve the ads you see online? Consumer: I agree that marketers today are usually respectful of my digital privacy (Net Agree) Australia India South Korea US 18-34 35+ 18-34 35+ 18-34 35+ 18-34 35+ Net Agree 25% 18% 63% 54% 17% 22% 29% 12% APPENDIX Data Tables (Source: ADI International Summit Survey 2017)

25. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 26 Consumer: For brands I use regularly, I am comfortable with them using my personal data to customize website content, emails, and advertising (Net Agree) Consumer: Compared to two years ago, I agree that advertisers are better at showing me ads I find valuable or compelling (Net Agree) Australia India South Korea US 18-34 35+ 18-34 35+ 18-34 35+ 18-34 35+ Net Agree 39% 22% 69% 59% 32% 33% 42% 24% APPENDIX Data Tables Australia India South Korea US 18-34 35+ 18-34 35+ 18-34 35+ 18-34 35+ Net Agree 40% 37% 46% 50% 50% 51% 43% 36% (Source: ADI International Summit Survey 2017)

26. © 2017 Adobe Systems Incorporated. All Rights Reserved. Adobe Confidential. 27 Consumer: I prefer to see ads that are personalized based on my interests, shopping habits, and preferences Consumer: Consumers’ attitude towards the personalized ads they receive Australia India South Korea US 18-34 35+ 18-34 35+ 18-34 35+ 18-34 35+ Net Agree 53% 36% 80% 73% 63% 53% 57% 41% Net Disagree 19% 32% 12% 10% 14% 16% 19% 32% Australia India South Korea US 18-34 35+ 18-34 35+ 18-34 35+ 18-34 35+ I don’t think ads should be personalized 23% 47% 7% 19% 10% 22% 17% 39% Ads are not personalized well enough 32% 14% 42% 31% 23% 21% 31% 18% APPENDIX Data Tables (Source: ADI International Summit Survey 2017)